Darrin C. Duber-Smith
Darrin C. Duber-Smith, MS, MBA, is president of Green Marketing, Inc., and senior lecturer at the Metropolitan State University of Denver’s College of Business. He has almost 30 years of specialized expertise in the marketing and management profession including extensive experience in working with natural, organic, and green/sustainable products and services. He was a co-founder of the Lifestyles of Health and Sustainability (LOHAS, c. 1999) market/industry model and was leader of the first U.S. industry task force that helped frame the Natural Products Association’s definition of natural (c. 2005). He has published over 80 articles in trade publications and has presented at over 50 executive-level events during the past 15 years. A frequent media contributor and recipient of The Wall Street Journal’s In-Education Distinguished Professor Award in 2009 and WSJ’s Top 125 Professors Award in 2014, Mr. Duber-Smith is author of Cengage Learning’s “KnowNow! Marketing” blog at http://community.cengage.com/GECResource2/info/b/marketing/. He can be reached at DuberSmith@GreenMarketing.net or firstname.lastname@example.org.
Razor blade sales are rapidly migrating online, illustrating the fact that sometimes consumer preferences and the requisite behavioral changes that follow can shift very rapidly. The online market for blades has nearly doubled over the past year to reach $263 million, and now represents 8% of the total market for these important personal care products. This is a massive shift and if it continues, retail brands like Gillette will suffer.
To be sure Gillette's online sales are growing too, but not as fast as rivals such as online leader Dollar Shave Club, and the brand has shifted its strategy from premium offerings and towards value offerings, which is probably a good idea. Companies like Harry's Razor, 800Razors, and Shave Mob are among the online brands that offer lower prices than Gillette. The bottom line is that online companies don't have to pay wholesalers and retailers to sell products through their channels. E-commerce players can therefore offer far lower prices, although such entities must sacrifice the higher volumes that they would achieve when using intermediaries through brick and mortar channels. Strategically speaking, Gillette should probably offer products under a different brand names which are exclusive to the online format so that there is no channel conflict with retailers who must offer Gillette products at much higher price points. Let's see what happens.
Marketers have long engaged in the rather dubious practice of suddenly offering less amount of product for the same price in the same packaging, a tactic that is officially called "slack fill". The ethical issue here is the lack of communication when it is done, as there is almost never any formal announcement, raising the question of whether or not the practice is at all deceptive and thus harmful to consumers. Think about your bag of potato chips, already mostly air, having even fewer chips in it! Doesn't this sort of thing often get the attention of regulators?
But slack fill rules already exist, and the ones on the books don't really discourage the behavior. Retailers must be informed well in advance and new bar codes must be issued among other requirements, and as long as the new amount is reflected on the packaging (in ounces, grams, or some other metric) there is precious little that consumers, advocacy groups, or competitors can do about it. Shouldn't there at least be a requirement to communicate the change on the new product so that consumers can more easily recognize that they are getting a de facto price increase? There have been several court cases involving "excessive packaging" that have resulted in fines paid and apologies given, but without more stringent regulations, it will continue to be an effective, yet indirect, way to raise prices for consumers, who are often none the wiser.
It looks like brand name outlets aren't just for manufacturers anymore. We know that natural products retail pioneer, Whole Foods Markets, has been struggling with high price points and increasing competition for the past few years and revenue has suffered as a result. Since lowering prices at its current grocery locations would dramatically lower profits and punish stockholders, company strategists instead announced that the company is looking at a new, smaller store format, one that would appeal a bit more to the financially strapped 18-34 age demographic, who want to buy natural products but cannot afford them. But if offering lower prices is ultimately the goal, how will it be achieved? Will manufacturers accept lower profit margins at the new store format? Will they have to do more volume to compensate for the lower margins?
One must give the marketers at Whole Foods some credit. For years, they have been successfully selling a private-label, store brand called "365" at their regular locations, and so marketers there have decided to build upon the brand equity generated over that period of time. The new store format will not only be called "365", but it will also feature mostly its store brand (much like a manufacturer's outlet mall store does). These products, as we all know, are sold at considerably lower price points than are national brands, which have to absorb huge marketing costs to maintain their respective shelf positions. Unlike outlet stores, however, Whole Foods has said that it will also sell non-private label brands, but it is not yet clear what this product mix might look like.
Some analysts think that this move will help them reach the under-35 crowd as rival Trader Joe's as successfully done, but others think that the new format will simply cannibalize existing Whole Foods customers rather than draw new ones in. But in losing its leadership in selling natural and organic products to much larger, and more mainstream rivals like Kroeger and CostCo, Whole Foods knows that it must do something to turn around its slumping revenue generation. This looks like the best play.
With all of the negativity surrounding professional spectator sports these days (and there is an unusual amount of it at present), it is nice to see a long-neglected market finally get what it deserves. That's right, in addition to the inevitable NFL franchise relocation, it looks like one of soccer's latest expansion teams (FC Los Angeles) has decided to build what will be the most expensive privately-financed facility in the U.S. It will be located near downtown and the University of Southern California and will assume the physical location of the soon-to-be-demolished LA Sports Arena. No taxpayer funds will be necessary, so it is expected that this deal will be on the fast track, and a venue-naming sponsor will only sweeten the opportunity for investors.
Major League Soccer is growing both in the U.S. and abroad, as more and more consumers take interest in America's interpretation of the world's most popular sport. Not only are fans increasingly interested, but also private investors who hope to gain return on investment and seem to believe that MLS will afford them such an opportunity. The team ownership group includes several notable personages like Magic Johnson, Mia Hamm, Tony Robbins, Nomar Garciaparra, and a host of other big names with deep pockets, and the team will compete with the well-established LA Galaxy for fans. A previous team, Chivas USA, failed to gain market share and folded last year. Hopefully, this time it will be different.
In looking at a league that began back in 1996 with teams playing in huge, vacant football stadiums, it's nice to see that 15 of its 20 franchises now play in their own facilities (13 built since 2005), making for a much improved sport product experience. The league is expected to expand to 23 teams by the time FCLA starts play, and there seems to be nothing stopping soccer's slow creep into the American consumer psyche.
The Colorado-based fast casual chain has always been known for its internationally-flavored pasta products, but up until recently, it has never been outside the U.S. In an effort to expand its customer base and prove that it can sail in international waters, marketers at Noodles & Co. have decided to set up shop in the northern part of North America--Canada.
It does seem like an obvious strategic move for the company since consumers in Canada and the U.S. share many common demographics and psychographics, And Toronto (the location of the first store) is an absolutely massive market. Noodles marketers believe that Canadians are adventurous and like to experiment, but honestly the same can be said of Americans right now. Yet Fast Casual is a $39 billion segment in the U.S., and many consumers are eschewing fast food places in favor of it. The Canadian location will offer breakfast, another trend also present in the U.S., and there is simply no reason to believe that Canadians won't embrace Noodles and other fast casual players in the same manner as Americans have done. Canada could be a new frontier for this rapidly expanding restaurant category.
More than one post over the last four years of the KnowNow! Marketing blog has addressed the issue of movie makers increasing reliance on "tentpoles", successive sequels that provide almost guaranteed revenue streams over extended periods of time. But there is another practice worth mentioning related to this strategy that actually provides even more revenue over even longer periods of time, and that is what the industry calls "franchising".
Franchising on the whole is essentially licensing. Many chain restaurants are actually owned and operated by individuals under such agreements. In the case of movies, franchising refers to not only sequels but also other licensed products such as video games, theme park rides, toys, movie spinoffs, and others. Disney, as even a casual observer might imagine, has turned this strategy into a case study on best practices with highly successful franchises like Frozen, Pirates of the Caribbean, Cars, Toy Story, and Monsters, Inc., among others. These franchises are all now well into the billions in total revenue earned over time, and several producers plan to release sequels in the near future. There seems to be no end to the revenue potential of these movie franchises, and in theory these successful businesses (as well as all of the tentpoles) can help fund riskier projects such as movies based on original scripts with unknown potential. But critics think that the practice actually detracts from these types of movies, with resources devoted to maximizing revenue rather than producing quality movie products. And if the flagging attendance at theaters over the past decade or so is any indication, the critics could be right on this one.
On the heels of New York City's proposal to compel chain restaurants to denote salty dishes with a salt shaker warning icon, another city that likes to regulate things is getting into the act--San Francisco. In an effort to curb the consumption of sugary beverages, city officials have proposed a first-of-its-kind group of rules that would require health warnings for sugary drinks. Billboard ads would require a warning statement about added sugar and its relationship to health, ads for sugary drinks would be forbidden on city property, and city departments would be banned from purchasing these beverages with municipal funds, among other ordinances. Too much?
The city believes it is acting in the public good, and indeed requiring warning labels isn't the same thing as New York City's attempt a few years ago to ban sodas over 16 ounces outright. Warnings and bans are very different approaches. The court ultimately didn't allow it. And often laws are passed at the city level before making their way to entire states, and in some cases the nation as a whole. The primary issue being debated across the entire nation is what the role of government should be in regulating what marketers of these products say and do. San Francisco, New York, Vermont, and other places are taking regulatory and legislative action in the name of health and wellness, and it seems that increased efforts in many other areas across the U.S. will follow. Marketers of sugary and salty foods beware!
It looks like New York is at it again. After a failed attempt to ban large sugary sodas by former mayor Michael Bloomberg, among additional efforts (some successful and some not) to regulate food over the past several years, city officials have placed yet another proposal on the table encouraging people to become healthier. Arguments over whether or not doing that is a legitimate role for government to assume is a debate for another time, but these days this sort of legislation is almost always pending at either the local, state, or national levels. Nutrition regulation has become a big deal for elected officials and regulatory agencies.
This time, city overseers have targeted salt instead of sugar and have proposed that warning labels be required on high-salt dishes at chain restaurants in the city. The Health Department recommendation would force chains to include a salt shaker-type icon on menus next to products that include more than the recommended daily intake of 2,300 milligrams of salt. Public health advocates simply love the idea as it helps the common good, and predictably the salt industry thinks it will be an undue burden on already struggling independent franchise owners. The city says that more information helps consumers make better informed decisions about their health. Can everyone be right?
In this case, the answer is "yes". All of these things are true, but an often overlooked fact is that the federal government has changed its mind a few times over the years as to how much of everything a healthy body can tolerate. Recently, for example, a major study revealed that having too little salt is actually worse than having too much salt and that the current recommended sodium levels might actually be a bit low. A similar measure that would require foods that contain genetically-modified ingredients (GMO's) has failed to gain traction everywhere except Vermont, but a labeling law at the federal level might nevertheless be around the corner. All of this is in spite of the fact that hundreds of studies have confirmed GMO's as completely safe. But we do know that too much salt, whatever level that might be, is bad for people.
Regulation can be a very good thing, but many feel that it often goes too far. It can be very expensive for companies who must pass on costs to already cash-strapped consumers. And when the science isn't certain, it might be best to take more of a wait-and-see approach rather than burden an industry with increased regulation. However, information does empower consumers. This is a complicated issue, and there are no easy answers. One thing is for certain, however, nutrition regulation is on the rise.
Despite the latest allegations of corruption as well numerous indictments, global soccer's governing body, FIFA, seems to be immune from bad publicity. Thus far, not a single sponsor has jumped ship. As a rule, advertisers eschew association with entities that generate negative publicity, firing product endorsers who misbehave and distancing themselves from sport properties (leagues, teams, etc.) that experience brand reputation issues. After all, why would any marketer want to pay millions of dollars to be associated with something negative? Indeed the NFL has had its issues lately, and as a result has lost exactly zero sponsors. What gives?
Scandal? What scandal? Even the writers at The Simpson's knew a reckoning was inevitable, but as long as a sports marketer can reach a billion or so consumers through one medium, it doesn't seem to matter what the leagues do. FIFA's brand has been tarnished, much like the NFL's has of late, but sponsors seem to believe that they can weather the storm and that short consumer memories will ultimately prevail. Sure, there were some strongly worded press statements and probably some idle threats, but the likes of Coke, McDonald's, Adidas and others aren't going anywhere. Make no mistake however, that if this was almost any other league, keeping sponsors, who have numerous choices as to where to put their marketing dollars, is a more difficult task. FIFA will make some changes to its organization, much like the NFL has, and hopefully this level of corruption never again touches the Beautiful Game. memories are indeed short and people are generally forgiving for a first offense. The scandal, while undoubtedly huge in scale, is nevertheless unlikely to affect the bottom line for the world's most popular sport.
We all know that consumers are increasing their consumption of online content through their ever-present mobile devices at the expense of the larger-format, non-portable traditional desktop devices. This is no great revelation. But what may surprise most people is that the desktop category, although losing "share" to mobile, is not actually in decline. As a matter of fact, desktop web usage may actually be increasing, although it is still losing ground to mobile as a share of total usage. What does this mean?
First it means that there is growth both in Internet users (the U.S. and global population is increasing, not declining) as well as Internet usage (we are using more and more of it), so both categories can still be growing, albeit one much faster than the other. It also means that many consumers probably still prefer to use larger-screen desktops at work and at home. Mobile is great for anytime/anywhere access but, especially with regard to video content, bigger is often better. So it is clear that portability is just one of many factors that consumers consider when they use the Internet, and that there are many others depending upon the situation. Marketers must take heed as they increasingly devote resources to the mobile marketing frenzy, and must not forget that although mobile will soon comprise half of all Internet usage, there is still a lucrative "other half" to consider when developing a marketing strategy.
The NFL's team relocation saga just got much more interesting. The only thing for certain is that a struggling franchise with stadium issues in their current home citiy will relocate to the under-served and highly-lucrative Los Angeles-area market. It's just a matter of when. And with the choices now narrowed down to three teams and two possible stadiums (both located in Carson), things are beginning to get tense. Until now, a St. Louis Rams return seemed imminent as owner Stan Kroenke secured some land near the now-demolished Hollywood Park Horse track and would have no trouble financing the project and finding a venue-naming rights sponsor. LA would probably love to have its Rams back. But another group, seeking to move both the Oakland Raiders and San Diego Chargers in a stadium-sharing agreement, has upped the ante. And both the Raiders and the Chargers have previously played in LA.
Banking giant Goldman Sachs has become involved and which will open up the funding of the facility to Wall Street investors rather than relying on taxpayers as has been done so much in the past. And this isn't Goldman's first rodeo either, as the company has financed recent, major deals involving stadiums for both the Yankees and the 49'ers. Clearly, the NFL would rather solve two problems at once and relocate both struggling franchises, but Mr. Kroenke, who is a vertically-integrated giant in the Denver-area sports market as well as a force in St. Louis, will not go away quietly. Can he make a better offer? Soon all of the cards will be on the table and the NFL will have to make a decision. Anything can happen, and there are billions to be made.
It's that time of year again. The time when movie makers introduce brand extensions or "tentpoles" in hopes that recognized movie franchises will attract what's left of the the movie-going masses. Franchises have always been around: Star Wars, Star Trek , and Harry Potter are only three of many hundreds of examples, and sequels often do well since customers kind of know what they are going to get when they see one of these tentpoles. Movie makers love them because they do not carry the risk that is inherent in scripts based on original concepts. This is also one of the reasons that we have seen so many movies based on comic book characters. These superheroes (as well as other well-known characters in tentpoles) are, by and large, a known entity.
Although these kinds of brand extensions do in fact bring in a reliable level of income, which is good for any business, over-relying on them is an obvious caveat for this strategy. In other words, one can only go to the well so many times before consumer fatigue sets in. But tentpoles will never go away, not only because consumers love sequels, but also because the gross revenues drawn from tentpoles can financially support an entire year's worth of releases in some cases. In theory, studios can take bigger risks with original content when they have such guarantees. Perhaps we might even begin to see increasing numbers of new concepts as consumers tire of the old tentpoles and demand that new ones be created. Fatigued movie-goers can only hope.
Re-branding is really a last resort for any marketer. It is basically sending a signal that what you are doing is not working and that you had better shape up or you will be shipped out by competitive forces and shifting market tastes. National Basketball Association franchises are no different than any other product in this respect, and as such it has become obvious to the new ownership in Milwaukee that change is needed.
Wracked by an overall subpar performance both on the court and in the stands for years, the team has invested in marketing (attendance and sponsorships) and has made a major effort to secure a deal for a new arena. And in order to properly re-introduce the brand as well as stimulate apparel sales, the Bucks have unveiled several new logos that balance tradition with the new direction that ownership hopes will bring in revenue.
But as we all know, spectator sports is a fickle beast. If the team continually under performs as the Bucks have, then revenues tend to follow the downward trend. No amount of marketing will ultimately make up for a poor product on the court. Yet making efforts to energize, and in effect re-introduce, the brand, is a good idea at this point. Perhaps such a strategy will help drum up the support needed to build a new arena and ultimately keep the team. A failure to do this might result in a relocation, and there are several cities ready to give it a go. Maybe they just need better management and players, or perhaps some better price points. Let's see what happens in Milwaukee.